Examining FOUR different kinds of economies

and how they answer the 5 Questions of Economics (remember my song)

Examining the Principles of Capitalism (Free Market Economy)

The Role of Government in Economics Where we are today in the world? Learning MORE NEW LANGUAGE Making connections and sense of this

information

What you’ll be doing today…

Remember our conversation about SYSTEMS- the

“isms”- this is where we dive in a little more Resources are limited we make choices we

evaluate trade offs/opp costs Businesses have to look at the factors of

production, the production process and make choices on how to provide goods and services to consumers

We as consumers make choices on those products Now we put all this into big picture

Making Connections…

Remember societies have to make choices on

how they can meets the NEEDS AND WANTS of the members of their community

Societies have to function under some sort of SYSTEM

There are FOUR types we are going to look at Traditional Economy Command Economy Free Market Economy Mixed Economy

Types of Economies Around the World

Traditional Economies Def: Economic

Questions answered by custom/traditions

Predominantly Agricultural

Developing or “3rd World”

Trade and barter oriented

Low Production and income per capita (per person)

Traditional Market in Ghana, Africa

Traditional Economies

Thinking Things through:

What role are the producers playing in this model?

What role does the consumer play?

Trade offs and Opportunity costs

Let me Help with you your thinking:

Producers “make” goods that are only available in their immediate area

Consumers have only limited options of products

Depend highly on trade to get “other” products

Def: Economic questions answered by the government

Very little economic choice

No private ownership Communism Old Soviet Union, old

Communist China, Cuba and North Korea

Command Economies

Karl Marx 19th century German

economist Author of

“Communist Manifesto” and “ Das Kapital” Workers should

control economy and distribute goods and services to the people

Founder of revolutionary socialism and communism

Command Economies

Thinking Things through:

What role are the producers playing in this model?

What role does the consumer play?

Trade offs and Opportunity costs

Lets put thoughts on this screen:

Take 3 mins to talk this out with your Star Wars Partner- Jedis you talk first- empire you’ll report out

Communism Falls Market reforms in China in

the mid 1970s.

Fall of the Berlin Wall in 1989.

Collapse of the Soviet Union 1991.

Free Market Capitalism (w/ some Mixed Economies) the only show in town.

Fall of the Berlin Wall-"Fall of Communism"

Free Market (Capitalist) Economies

Economic questions answered by producers and consumers

Limited government involvement

Private property rights

Wide variety of choices and products

U.S., Japan Grocery Shopping

Free Market (Capitalist) Economies

Thinking Things through:

What role are the producers playing in this model?

What role does the consumer play?

Trade offs and Opportunity costs

Lets put thoughts on this screen:

Take 3 mins to talk this out with your Star Wars Partner- Empire you speak first- Jedis you report out

Adam Smith 18th century Scottish

economist Published “The Wealth

of Nations” in 1776 Explained the

workings of the free market within capitalist economies

He provided the theory of the Free Market system

Invisible hand of the market

Issues in the Free Market

Laissez-faire - Government stays out of

business practices “hands off” to let the market place determine production, consumption and distribution.

Individual freedom and choice emphasized

Adam Smith (cont.)

The Free Market-A Visual

The Market Place

This “meeting place” is called the Free Market AKA Capitalism (System)

Principles of Capitalism Competition –

Businesses must compete to sell their products to consumers

How does competition create better options for consumers?

Principles of Capitalism Voluntary Exchange

– businesses and consumers MUST be free to buy or sell what and when they want.

Why is this important to have in order for products/goods to “move” in the market?

Principles of CapitalismPrivate Property –

Individuals and businesses MUST be able to get the benefits of owning their OWN property. Government doesn’t control it.

Why wouldn’t you want govt to have control of property?

Principles of Capitalism Consumer

Sovereignty – consumers get to make free choices about what to buy and this helps drive production

How do you think this can impact the movement of goods and services?

Principles of Capitalism Profit Motive –

people want to make or save $$$$. Their “Self Interest” motivates Capitalism.

In 1929, the “Free Market” failed, crashed,

broke down, collapsed, etc Something had to be done in order to protect

people’s lives who were affected by the crash Therefore Govt involvement in the free

market increased passed regulations (laws) to create a “Safety Net” to “catch” people if the market falls again

What happens when the market “crashes”?

Principles of Capitalism Social Safety Net –

“Mixed Economy” idea that says the government should NOT allow people to suffer in economic crisis (natural part of Capitalism’s “Business Cycle”), but provide security instead Examples of the Net: Social Security, Unemployment Welfare, etc.

Government involvement and ownership and control of property, of decision making, and companies.

Government control of business

Social “safety net” for people

Socialism Common in Europe, Latin

America, and Africa The Nordic Model of Mixe

d Economy

Mixed Economy/Socialism

There are some trade offs and opportunity costs

with mixed economies and the Nordic ModelTax Rates for the countries in the Nordic Model Denmark – 51% Finland- 30% Iceland- 46% Norway- 47% Sweden- 57% U.S. Tax Rates

Issues with Mixed Economies

This conversation described the basics of OUR

economic system. But wait, what were the issues described in the

economic recession of 2008? What were the Occupy Wall Street protesters

asking for? Take 3 mins with your SW partner to remember

our initial conversations about the Economy Out to the floor for discussion

Closing This Conversatoion

For your exit slip, I want to see how your brains are

processing this “system” and put it next to the original issues discussed at the start of Econ

Take a look at ALL of the “Principles of Capitalism” Choose which ones have the potential to create the

problems we saw in the 2008 Economic Crisis Discuss how they can be a problem- you can refer

back to any previous information What are your thoughts right now on our economic

system described today? Your opinion, reactions, etc

Bringing the Two Worlds Together